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The Role of Government in East Asian Economic DevelopmentComparative Institutional Analysis$
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Masahiko Aoki, Hyung-Ki Kim, and Masahiro Okuno-Fujiwara

Print publication date: 1998

Print ISBN-13: 9780198294917

Published to Oxford Scholarship Online: January 2007

DOI: 10.1093/acprof:oso/9780198294917.001.0001

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Financial Restraint: Toward a New Paradigm

Financial Restraint: Toward a New Paradigm

Chapter:
(p.163) 6 Financial Restraint: Toward a New Paradigm
Source:
The Role of Government in East Asian Economic Development
Author(s):

Thomas Hellmann

Kevin Murdock

Joseph Stiglitz (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198294917.003.0006

This chapter introduces the new concept of financial restraint: a set of financial policies that create rent opportunities in the banking and production sectors. It is argued that these rents may curtail a bank’s moral hazard behaviour and enhance incentives for monitoring and savings mobilization. Consequently, more efficient credit allocation and financial deepening are induced under financial restraint than under eitherlaissez-faireor financial repression.

Keywords:   financial policy, banking sector, production sector, rents, credit allocation

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